- IESE professor Pablo Fernández opened the Degussa Meetings, organised by Proa ComunicaciónHe gave a presentation in which he analysed real cases that he has encountered in the more than 150 trials and arbitrations in which he has participated.
- On the President of the Government's decision to change the law so that banks pay the Stamp Duty, he said that "it is like saying that citizens are not going to pay for water and that it will be paid by the communities of neighbours".
Madrid, 8 November 2018. Lack of expertise and training, as well as not seeking specialist advice, is the main cause of mistakes made by the judiciary and the legal profession when dealing with financial cases, according to IESE professor Pablo Fernández, who opened the Degussa Meetings this morning with a talk on 'Errors of judges and lawyers on finance', held at the Madrid headquarters of the leading company in Europe in the trading of physical gold for investment.
In very clear language, and illustrating his explanations with concrete examples that he had encountered during his participation in more than 150 court and arbitration proceedings, on boards of directors and in takeovers, he pointed out that this lack of expertise is already apparent in the legislation itself. Those who draft laws, "mainly state lawyers and court lawyers", often do not differentiate between accounting, finance and financial economics. "Although I also know very sensible state lawyers who do not make these mistakes," he said. Moreover, in this area, according to Professor Fernández, "facts and opinions are often confused".
He considered it very important when making company valuations to differentiate between accounting and finance, "as they are very different". "Accounting is interpreted as something that has to do with the value of companies or the money they generate, and profit as the money that comes in minus the money that goes out, which is the most typical error," he explained. "Finance has more to do with a trade and is based on sound judgement, experience and some technical knowledge".he said. And to support this theory, he equated the valuation of a company with that of a cow, "the same factors are involved". Because, in his opinion, finance is based on simple concepts, "money coming in, money going out, risk of the money expected to be received...", which are complicated by synonyms, words that have nothing to do with what they designate and confusing terms, "especially if you listen to the radio, read confidential reports, expert reports, receive alerts on the subject or visit various specialised websites...".
Using verbatim sentences from real sentences, summarised ten of the most common mistakes in finance and accounting. He refuted them one by one with great subtlety and a sense of humour. To illustrate his analysis, he also alluded to specific cases, such as the Supreme Court's ruling on mortgage floor clauses, describing all the incongruities that he considers it contains. "How can something that is perfectly understood by the parties to a contract at the time it is signed be abusive," he said, putting the high court to shame. He pointed out that the consequences of rulings such as this one "increase the legal insecurity of companies and individuals, reduce the attractiveness of investing in Spain and, furthermore, create jurisprudence".
To avoid rulings such as the one in the example, he recommended that judges should "consult people who do know about the subject and who are not usually the ones who are often considered as experts".He was very critical of them. He also recommended compulsory courses for commercial judges on business, economics, accounting, finance, classification, operation and use of financial instruments, as well as the creation of a section with commercial judges in the Supreme Court.
His presentation sparked a lively debate among the audience, who, among other questions, were interested in Professor Fernández's opinion on the recent controversial Supreme Court ruling that applies the Stamp Duty Tax to buyers and on the announcement by the President of the Government that the law will be changed so that this tax will be paid by the banks. "It's like saying that the citizens are not going to pay for water and that it will be paid for by the residents' associations".He responded with irony to the last part of the question.
The Degussa Meetings are stable forums for the dissemination and exchange of ideas with the participation of prominent managers, academics, politicians and professionals. Their aim is to promote "a genuine dialogue in which customers, partners, friends and suppliers participate", explains Tomás Epeldegui, director of the German company in Spain. They address current affairs, analyses of the economic situation and others related to Degussa's own activity, investment in precious metals.
Pablo Fernández holds a PhD in Business Economics and a Master's degree in Business Economics from Harvard University. He also holds an MBA from IESE and a degree in Industrial Engineering from the University of Navarra (San Sebastian). Before starting his teaching career, he worked as an analyst and financial coordinator for Pepsi Cola for Southern Europe (Portugal, Spain, Italy, Libya and Malta) in Spain and also in Rome, while combining it with the financial management of the Mediterranean region (Egypt, Turkey, Lebanon and Jordan) and Sudan.
Degussa is Europe's leading company in the trade of physical investment gold, bullion and coins. But, in addition, at its Madrid headquarters you can find silver coins, platinum, palladium and also jewellery and other gift items. All of these can be engraved and stored in the company's safe deposit box rental service. Its products can also be purchased through its online shop (http://www.degussa-mp.es/onlineshop ), open 24 hours a day. It also offers the possibility to buy back bullion and/or coins. It is accredited by the LBMA, the London Bullion Market Association, the world's leading association of gold and silver market professionals.